Three essays on international finance




Skouratova, Elena V.

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I study three topics in international finance. First, I analyze competition between ICE Futures Exchange and NYMEX, and market quality conditions before and after the introduction of the NYMEX full-size crude oil contracts. I find price clustering of floor-traded regular-size NYMEX futures significantly improved after introduction of parallel electronic trading, indicating lower trading costs and better market quality. Price discovery analysis revealed that electronically traded futures contracts contribute similarly to fundamental value determination, open-outcry trading provides little price discovery. The research provides insights into the importance of regulatory parity between US exchanges and non-regulated markets. Second, consistent with crosslisting decreasing the cost of capital, I find that firms which issue American Depositary Receipts (ADRs) are much more likely to undertake an acquisition than non-crosslisted firms. The results do not appear to be driven by self-selection, as the increase in acquisitions is robust to a Heckman correction as well as to a fixed-effect analysis of only those firms which crosslisted during the sample period. Adding the home country's shareholder rights to the analysis, we find that crosslisted firms increase their takeover activity primarily if they are from weak shareholder rights countries. This evidence is consistent with crosslisting reducing the cost of capital of firms from weak governance countries significantly, and this reduction in cost of capital allows these firms to pursue more domestic and international takeovers. Third, I examine different characteristics of private and public non-US companies that attract US acquirers. I find that size, liquidity and tangibility are the company level characteristics that affect the probability that a company will become an acquisition target. Country level development and governance characteristics and evaluation of country financial markets also play an important role in determining the probability of an acquisition. In general, US acquirers of private targets experience positive abnormal returns, while abnormal returns of public target acquirers are not significantly different from zero.


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International Finance